First-time buyers hoping to get on the property ladder in expensive cities like Vancouver and Victoria may be able to get some assistance this year with the new BC Government Down Payment Plan. The plan, designed to help homebuyers put together money for the down payment with a 25-year loan, will match buyers’ contribution up to a maximum of $37,500. While this is good news as it helps to relieve the pressure on the bank of mom and dad, there are a few things you should think about if you’re wondering whether you should lend your child money to buy a home.
Is it a Gift or a Loan? And to Whom?
There’s nothing to say that you shouldn’t help your child or family member come up with a down payment. But, there are a few things that you need to clarify right from the beginning.
Let’s suppose you give your child half of the down payment, and the government foots the rest. Have you given the money as a gift, or a loan? Family Law Firm Brown Henderson Melbye (BHM) says that, “What is particularly good to know is whether or not any money the child received from a parent came to them as a gift or a loan, and whether it came to them alone or to their partner as well.”
Get it in Writing
It can be tricky getting the law involved when it comes to family agreements, but it’s vital. You’d be amazed at how useful having a contract is, especially if you run into any conflict further down the line.
BHM Lawyers note, “It is really important, particularly in the context of the Family Law Act, British Columbia’s statue that guides the division of assets when couples separate or divorce, to know who owned what at the beginning of the relationship and who was gifted or who inherited what money.”
Consider getting a pre-nuptial agreement or cohabitation agreement drawn up by your lawyer to ensure that the couple knows exactly what’s going on with the finances.
Look After Your Interests
Before you go ahead and make an offer, calculate the monthly mortgage repayments, taxes and duties, and any renovations that the home requires. If your child is just starting out in their career, can they afford to make the monthly payments? If you’re going to use up your savings to raise the deposit, will you be financially secure? Hire a lawyer to help with the legal process and ensure you have a clear picture of everything from the very beginning.
If you have any questions about the BC Government Down Payment Plan or want to discuss anything mentioned in this article, feel free to get in touch.
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